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Goenka Diamond & Jewels Ltd.

BSE: 533189 Sector: Consumer
NSE: GOENKA ISIN Code: INE516K01024
BSE 00:00 | 24 Apr Goenka Diamond & Jewels Ltd
NSE 05:30 | 01 Jan Goenka Diamond & Jewels Ltd
OPEN 0.28
PREVIOUS CLOSE 0.27
VOLUME 48792
52-Week high 0.42
52-Week low 0.21
P/E 13.00
Mkt Cap.(Rs cr) 8
Buy Price 0.28
Buy Qty 1.00
Sell Price 0.28
Sell Qty 1822.00
OPEN 0.28
CLOSE 0.27
VOLUME 48792
52-Week high 0.42
52-Week low 0.21
P/E 13.00
Mkt Cap.(Rs cr) 8
Buy Price 0.28
Buy Qty 1.00
Sell Price 0.28
Sell Qty 1822.00

Goenka Diamond & Jewels Ltd. (GOENKA) - Auditors Report


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Company auditors report

To the Members of Goenka Diamond and Jewels Limited Report on the Standalone Ind ASFinancial Statements Disclaimer of Opinion

We were engaged to audit the accompanying standalone Ind AS Financial statements ofGoenka Diamond and Jewels Limited ("the Company") which comprise the BalanceSheet as at 31st March 2019 and the Statement of Profit and Loss (including othercomprehensive Income) Statement of Cash Flows and the Statement of Changes in Equity forthe year then ended and notes to financial statements including a summary of thesignificant accounting policies and other explanatory information.

We do not express an opinion on the accompanying standalone Ind AS financial statementsof the Company. Because of the significance of the matter described in the Basis forDisclaimer of Opinion section of our report we have not been able to obtain sufficientappropriate audit evidence to provide a basis for an audit opinion on this standalone IndAS Financial Statements

Basis for Disclaimer of Opinion

(a) Refer Note 9(b) 19(b) 5(a) and 12(a) of the standalone Ind AS financialstatements wherein the company has not translated following monetary items denominated inforeign currency as at the year ended closing rate and has been carried forward at therate as at 31st March 2015 31st March 2016 and / or 31st March 2017 which isnot in accordance with Ind-AS -21 "The Effect of changes in Foreign ExchangeRates" and accounting policy followed by the Company.

i. Trade receivable amounting to ' 69806.99 lacs

ii. Trade payables and other payable amounting to ' 29717.66 lacs

iii. Loans and Advances to subsidiaries (including accrued interest) amounting to '1819.52 lacs

The company has not provided for cumulative exchange gain (net) on the above itemsamounting to ' 4007.63 lacs including exchange gain amounting to ' 2919.62 Lacspertaining to year ended March 31 2019. Accordingly exchange gain for the year isunderstated by ' 2919.62 Lacs. The Company has not recognized deferred tax assetamounting to ' 329.74 lacs on the cumulative exchange gain (net) including deferred taxcredit for the year ended March 31 2019 amounting to ' 759.10 Lacs.

(b) The Company has defaulted in repayment of loans taken from the banks due to whichthe banks have recalled their loans and have initiated legal actions. Refer Note 20(D)(2)of standalone Ind AS financial statement wherein its stated that the management hasdecided not to provide interest on such loans and consequently based on the calculationdone by the management total interest amounting to ' 10400.16 Lacs determined atestimated rates has not been provided for in the books of accounts including interestamounting to ' 3644.35 Lacs pertaining to the year ended March 31 2019. Accordinglyfinance cost for the year is understated by ' 3644.35 Lacs.

Had the exchange difference and deferred tax thereon as stated in para (a) above andinterest on loans as stated in para (b) above been provided the loss after tax for theyear would have been decreased by ' 34.37 Lacs. Accordingly Trade Receivables shown underCurrent Financial Assets are understated by' 5498.66 Lacs Trade Payables Interestpayable to banks and Other Payables shown under Current Financial Liabilities areunderstated by ' 12011.88 Lacs Loan to a Subsidiary shown under Non-Current FinancialAssets is understated by' 84.42 Lacs Deferred Tax assets are understated by ' 329.74 Lacsand other Current Financial Assets are understated by ' 36.26 Lacs as at March 31 2019.

(c) We draw attention to Note No. 20(D)(2) and 20(D)(3) of standalone Ind-AS financialstatements regarding default in repayment of loans and interest to banks owing to whichthe banks has classified the account as NPA and recalled its loans and had initiatedvarious legal actions for recovery of its dues including notices under Section 13(2) ofthe SARFESI Act and petition filed by a bank under section 7 of the Insolvency andBankruptcy Code 2016 which are still pending for hearing. The outstanding loan balancesdue to banks amounting to ' 9770.13 Lacs shown under Current Financial Liabilities forwhich no confirmation/statements have been obtained and are subject to reconciliation andsubsequent adjustments.

(d) Refer Note No. 9(a) of standalone Ind AS financial statements regardingnon-provision of the expected credit loss/impairment relating to overdue Trade Receivablesof' 69877.78 Lacs as per the requirement of Ind- AS 109 "FinancialInstruments". In view of defaults in payment obligations by the Trade Receivables ondue date non-recoveries from Trade Receivables non-confirmations/ reconciliation fromTrade receivables initiation of legal action/ suits against Trade Receivables by thecompany notices/ summon to the Company from Enforcement Directorate Reserve Bank ofIndia Development Commissioner of Surat SEZ and in absence of clear forward lookinginformation regarding outcome of pending legal actions initiated and time frame andquantum of realisability of these Trade receivables we are unable to determine the amountof expected credit loss/ impairment based on provision matrix as per the requirements ofInd-AS 109 "Financial Instruments" and its consequential impact on thefinancial statements.

(e) Refer Note No. 5(b) and 40(c) of standalone Ind AS financial statements regardingnon-provision of the expected credit loss/ impairment on loan to a subsidiary amounting to' 1782.08 Lacs (including accrued interest) and investment in an entity by way ofOptionally Convertible Debentures amounting to ' 559.15 Lacs (including accrued interest)has been recognized as per the requirement of Ind- AS 109 "FinancialInstruments". The net worth of above subsidiary and entity is negative and based onreasonable and supportable information regarding the current financial status and businesscondition of these entities there has been significant increase in credit risk and therecould be delay/default in recovery of these amounts. Considering the above we are unableto comment on the amount of expected credit loss/ impairment and its consequential impacton the financial statements.

(f) The Inventory has been taken on the basis of physical verification carried out bythe management as at the year-end and its valuation is based on determination of estimatednet realizable value and specific identification which involves technical judgment ofmanagement. We have relied upon by the physical verification and valuation of theInventory as certified and determined by the management.

(g) Refer Note No. 40(b) regarding investment of' 2.03 lacs and advance of'59.78 lacsto subsidiary namely M.B. Diamonds LLC and investment of' 7.44 lacs in its subsidiarynamely Goenka Diamond and Jewels DMCC the net-worth of these subsidiaries as at the yearend is negative. The Company has not made any provision for Impairment against theseinvestments and advance.

(h) Balances with Banks amounting to ' 24.61 lacs (debit balances) and ' 15.31 lacs(credit balance) at the year end Trade Payables and Other Current Assets and Liabilitiesare subject to confirmations and consequential adjustment thereof.

(i) Material Uncertainty related to going concern

The Company's operating results have been materially affected due to various factorsincluding non-realization of Trade receivables defaults in repayment of loans andinterest to banks non-availability of finance due to recall of loans by banks inconsortium legal actions/ insolvency proceedings initiated by banks against company forrecovery of its dues notices/ summon from Enforcement Directorate Reserve Bank of IndiaDevelopment Commissioner of Surat SEZ and from other regulatory authorities pendingproceeding with National Company Law Tribunal Debt Recovery Tribunals and other courtsfor recovery of banks dues and attachment of company's properties assignment and transferof dues of banks in favor of an asset reconstruction company (ARC) pending income taxdemands and consequent attachment of bank accounts by Income tax department outcome ofpending legal action initiated against debtors impact of actions and forthcoming actionsthat may be taken by various legal and statutory authorities due to various factorsmentioned herein reliance on cash sales for meeting out expenses overall substantialdecrease in volume of business and sales non-payment of statutory dues and taxes overduecreditors non realization of loan and interest thereon from a subsidiary etc.. Theappropriateness of the going concern assumption is dependent on the company's ability toraise adequate finance from alternative means and / or recoveries from overseas TradeReceivables to meet its short term and long term obligations as well as to establishconsistent business operation. The above situation indicates that material uncertaintyexist that cast significant doubt on company's ability to continue as a going concern.

Because of the significance of the matters described above in the "Basis ofDisclaimer of Opinion" section of our report absence of sufficient appropriate auditevidences and Material uncertainty related to Going Concern paragraph above it is notpossible to form an opinion on the financial statements due to the potential interactionof the multiple uncertainties and their possible cumulative effect on the financialstatements. Accordingly we do not express an opinion on the financial statements.

Responsibilities of Management for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Standalone Ind AS Financial Statements that give a true and fair view of thefinancial position financial performance cash flows and changes in equity of the Companyaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and the maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the Standalone IndAS Financial Statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

Those Board of Directors are also responsible for overseeing the financial reportingprocess of the Company.

Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our responsibility is to conduct an audit of the Company's financial statements inaccordance with Standards on Auditing and to issue an auditor's report. However becauseof the matter described in the Basis for Disclaimer of Opinion section of our report wewere not able to obtain sufficient appropriate audit evidence to provide a basis for anaudit opinion on these standalone Ind-AS financial statements.

We are independent of the Company in accordance with the Code of Ethics and provisionsof the Companies Act 2013 that are relevant to our audit of the standalone Ind-ASfinancial statements in India under the Companies Act 2013 and we have fulfilled ourother ethical responsibilities in accordance with the Code of Ethics and the requirementsunder the Companies act 2013

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure 1 a statement on the matters specified in paragraphs 3and 4 of the Order.

2. As required by section 143 (3) of the Act we report that:

a. As described in Basis of Disclaimer of Opinion paragraph we are unable to obtainall the information and explanations which to the best of our knowledge and belief werenecessary for the purpose of our audit;

b. Due to possible effects of the matters as described in the Basis of Disclaimer ofOpinion paragraph we are unable to state whether proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of thosebooks;

c. The Balance Sheet Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account;

d. Due to effects/ possible effects of the matters described in Basis for Disclaimer ofOpinion paragraph we are unable to state whether the aforesaid standalone Ind-ASfinancial statements comply with the Accounting Standards specified under section 133 ofthe Act read with Rule 7 of the Companies (Accounts) Rules 2014 Companies (IndianAccounting Standards) Rules 2015 as amended;

e. On the basis of written representations received from the directors as on March 312019 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 312019 from being appointed as a director in terms of section 164 (2) of theAct;

f. The matters described in Basis of Disclaimer of opinion paragraph and otherobservations made in statement on the matters specified in paragraph 3 and 4 of the Orderabove may have an adverse effect on the functioning of the Company.

g. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report;

h. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act (as amended) in ouropinion and to the best of our information and according to the explanation given to usthe remuneration paid by the Company to its Directors during the year is in accordancewith the provisions of section 197 of the Act;.

i. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its Ind AS financial statements - Refer Note 40 to the Ind AS financialstatements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company

For Ummed Jain & Co.
Chartered Accountants
ICAI Firm Reg. No.119250W
Akhil Jain
Partner
Membership No.137970
Place: Mumbai
Date: May 29 2019

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 under the heading of "Report on Other Legal andRegulatory Requirements" of our Report of even date)

(i) (a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) During the year the fixed assets of the Company have been physically verified bythe management. In our opinion the frequency of verification is reasonable having regardto the size of the Company and nature of its assets. No material discrepancies werenoticed on such verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company except building at Jaipur having value of '10.24 lakhs(Net block as at year-end ' 3.54 lakhs) is yet to be registered in the name of Company.

(ii) The inventory has been physically verified during the year by the management. Inour opinion the frequency of verification is reasonable. The discrepancies noticed onverification between the physical stocks and the book records were not material and havebeen properly dealt with in the books of account;

(iii) The Company has granted unsecured loans to one of its subsidiary company coveredin the register maintained under section 189 of the Companies Act 2013 (‘the Act').

(a) In our opinion the rate of interest and other terms and conditions on which theloans had been granted to subsidiary listed in the register maintained under Section 189of the Act are not prima facie prejudicial to the interest of the Company.

(b) In the case of the loans granted to the subsidiary listed in the registermaintained under section 189 of the Act the company has not stipulated schedule ofrepayment of principal and payment of interest and therefore we are not in position tomake specific comment as regard to repayment of the principal or receipts are regular.

(c) Since there is no stipulation regarding repayment of principal and payment ofinterest we are unable to comments on the overdue amount for more than ninety days.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans and investments made.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of Sections 73to 76 of the Act and the rules framed there under.

(vi) As explained to us the maintenance of cost records under sub section (i) ofSection 148 of the Companies Act 2013 has not been prescribed by the Central Governmentfor the Company.

(vii) (a) The Company is not regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insurance incometax sales tax service tax value added tax customs duty excise duty cess and anyother material statutory dues applicable to it.

(b) According to the information and explanations given to us undisputed amountspayable in respect of provident fund employees' state insurance income tax service taxand any other material statutory dues applicable to it were outstanding at the year endfor a period of more than six months are as under: -

Nature of Statute Nature of Dues Amount (In Lakhs) Period to which the amount relates Due Date Date of Payment
Income Tax Act 1961 TDS 6.38 01/04/2018 to 31/08/2018 07th of Next Month Not Yet paid
Employee Provident Fund Organization Provident Fund 9.85 01/04/2018 to 31/08/2018 21st day of next month Not Yet paid
Maharashtra/ Surat Labour welfare Fund MLWF/ GLWF 0.005 01/04/2018 to 31/08/2018 05th of Next Month Not Yet paid
Employee State Insurance Corporation E.S.I.C. 1.76 1/04/2018 to 31/08/2018 15th day of next month Not Yet paid
Department of Sales Tax Maharashtra Profession Tax 0.26 01/04/2018 to 31/08/2018 21st day of next month Not Yet paid
Maharashtra Value Added Tax Act 2002 VAT 4.25 01/04/2018 to 31/08/2018 21st day of next month Not Yet paid
Goods & Services Tax Act2017 GST 9.09 01/07/2018 to 31/08/2018 20th day of next month Not Yet paid
203.07 Financial Year 2012-13 March 31 2013 Not Yet paid
(excluding Interest)
Income Tax Act 1961 Income Tax
53.87 Financial Year 2012-2013 14th Oct 2013 Not Yet paid
(excluding Interest)
Central Excise and Service Tax 1.40 FY 2008-2009 Commissioner of Central Excise has decided appeal in favour of the Company Not Yet paid
Customs Act FY 2011-2012

(c) According to the information and explanation given to us the dues outstanding withrespect to income tax sales tax wealth tax service tax value added tax customs dutyexcise duty cess and any other material statutory dues applicable to it on account ofany dispute are as follows:

Nature of Statute Nature of Dues Amount (In lakhs) Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Income Tax 0.98 AY 2004-2005 CIT Appeal - Mumbai
834.19 AY 2008-2009 ITAT Appeal Mumbai
528.29 AY 2009-2010 ITAT Appeal - Mumbai
40.46 AY 2010-2011 ITAT Appeal - Mumbai
1893.70 AY 2010-2011 ITAT Appeal - Mumbai
40.65 AY 2011-2012 ITAT Appeal - Mumbai
1503.55 AY 2012-2013 ITAT Appeal - Mumbai
60.49 AY 2013-2014 ITAT Appeal - Mumbai
86.84 AY 2014-2015 CIT Appeal - Mumbai
Punjab Value Added Tax VAT 31.83 FY 2012-13 In the office of Dy. Excise & Taxation Commissioner (Admn). Ludhiana Division Ludhiana

(viii) The Company has defaulted to various banks in re-payment of working capital -export credit facilities and Corporate Loan which have been crystallized and/or becameoverdue or recalled at various dates the summarized position of such defaults at thebalance sheet date is as under: -

Details of continuing defaults

Name of Bank Facility Date of Default Amount Date of default ended
Central Bank of India Post & Pre Shipment Loans Jan 2014 1032.78 Continuing
Corporation Bank Post & Pre Shipment Loans and Term Loan April 212016 2284.80 Continuing
Punjab National Bank Post & Pre Shipment Loans and Term Loan March 312016 4493.31 Continuing
Punjab & Sind Bank Post & Pre Shipment Loans June 30 2014 3141.25 Continuing
State Bank of India Post Shipment Loans March 212016 884.85 Continuing
AXIS Bank Post & Pre Shipment Loans and Term Loan July 312016 2089.86 Continuing
UCO Bank Alchemist ARC Ltd April 4 2016 1002.40 Continuing
Karnataka Bank Alchemist ARC Ltd June 29 2016 758.82 Continuing
Axis Bank Ltd Overdrawn Balances in Bank Current Account July 312016 1362.64 Continuing
Corporation Bank Overdrawn Balances in Bank Current Account April 212016 15.31 Continuing
Punjab National Bank Overdrawn Balances in Bank Current Account March 312016 2.84 Continuing
Punjab Sindh Bank Overdrawn Balances in Bank Current Account June 30 2014 1090.84 Continuing

The amount of Date of default shown is the date NPA

# default shown includes total outstanding of loans of respective banks .The abovedefaults are the amounts as on the date of the defaults and do not include any levies ofinterest and penal interest charged by the banks / provided by the company after the dateof the defaults or its subsequent reversals by some banks. The above defaults does notincludes defaults of payment of interests amounting to ' 10400.16 lakhs as calculated bythe management @17 % (approx) on working capital borrowing availed by the Company as thecompany is not accounting for any interest from April 1 2016 even though the banks haveeither charged interest but subsequently reversed or have not charged interest.Consequently we are unable to quantify and give period wise details of the defaults ininterest. However under the head "Other Current Financial Liabilities" (NoteNo. 20) amounts of ' 530.79 lakhs and ' 2471.64 lakhs being the "Interest Accrued anddue" and "Overdrawn Current Account Bank Balances" respectively are theamounts of interest charged or provided for the period of which is unascertainable.

Loan facilities recalled by banks include ' 9770.13 lakhs being outstanding of fewbanks and ARC for which neither bank statement nor confirmations of balance were received

(ix) The Company during the year did not raise any money by way of initial public offeror further public offer (including debt instruments). In our opinion and according toinformation and explanations given to us the term loans raised during the year wereapplied for the purpose for which those are raised.

(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.

(xi) In our opinion the managerial remuneration paid or provided for is in accordancewith the requisite approvals by the provisions of section 197 read with Schedule V to theCompanies Act 2013.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934

For Ummed Jain & Co.
Chartered Accountants
ICAI Firm Reg. No.119250W
Akhil Jain
Partner
Membership No.137970
Place: Mumbai
Date: May 29 2019

Annexure - B to the Auditors' Report

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of GOENKADIAMOND AND JEWELS LIMITED ("Company") as of March 31 2019 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Company's internal financialcontrols system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of un-authorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Basis of Qualified Opinion

According to information and explanations given to us and based on our audit thefollowing significant deficiency/material weakness has been identified as at March312019: -

a. The company did not have an appropriate internal control system for customeracceptance customer credit evaluation and establishing customer credit limits based onthe economic industry and customer's financial considerations. This has resulted in hugeold outstanding dues from customers and insignificant recoveries there-against owing towhich the Company has defaulted in its obligations for repayment of its dues to banks andcreditors. Further internal control procedures are not operating for periodic review ofage-wise analysis of trade receivables procedure and manner for timely action againstdefaulting debtors and establishing methodology underlying assumptions and policies forprovision for doubtful debts and its appropriateness on periodic basis. These materialweakness/ significant deficiency could potentially result in Company recognizing revenuewithout establishing reasonable certainty of ultimate collection and could lead toaccounting of uncollectible trade receivables.

b. The Company's internal financial control is not operating effectively with regard tolegal and regulatory compliances mainly on account of payment of statutory dues/ taxes andalso in timely payment of interest and repayment of its loan from banks. Certain defaults/non-compliances could be result of the liquidity crunch faced by the Company due tomaterial weakness as mentioned in para (a) above. This ineffective internal control overlegal and regulatory compliance and timely payments of interest and repayment of loanscould have material effect on the financial statements of the Company and its ability tocontinue as going concern.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.

Opinion

In our opinion except for the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas maintained in all material respects adequate internal financial controls overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at March 312019 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the ICAI.

For Ummed Jain & Co.
Chartered Accountants
ICAI Firm Reg. No.119250W
Akhil Jain
Partner
Membership No.137970
Place: Mumbai
Date: May 29 2019